The Indonesia Stock Exchange (IDX) has issued a new listing rule for shares and equity-type securities. The new rule provides new requirements for listing on the IDX and clarifies several items that are not clearly regulated under the old rule.
The new listing rule, issued by the IDX under Decree of the Board of Directors of IDX No. Kep-00183/BEI/12-2018 dated 26 December 2018 (New Listing Rule), introduces some important changes, which include:
- relaxation of listing requirements on the development board
- corporate governance to follow OJK rules - no requirement to have an independent director
- fewer documents to be submitted to IDX
- no preliminary listing agreement
- unless required by IDX, no mandatory mini expose
- required action plan for breaching the free-float requirements
- new requirements (including pricing) for additional securities listings through certain corporate actions
Other than editorial changes made throughout the rule, below are some important provisions in the rule that should be observed:
1. Listing on the Development Board. While there are no major changes to the requirements for listing on the main board, the New Listing Rule introduces new provisions that essentially provide leniency for a company that wishes to seek (public) equity fundraising and list its shares on the development board.
The New Listing Rule allows the requirement to operate for 12 consecutive months within the same core business to be fulfilled by a subsidiary, with the parent entity being the prospective listed company.
Further, net tangible assets of at least IDR 5 billion is no longer the only company asset/value requirement. It is now just one alternative. Under the New Listing Rule, a prospective listed company could qualify for listing if it fulfils one of the following requirements:
- it has net tangible assets of at least IDR 5 billion
- it has both of the following:
- operating profit (laba usaha) for the most recent financial year of at least IDR 1 billion
- share capitalization prior to the listing date of at least IDR 100 billion
- it has both of the following:
- operating revenue (pendapatan usaha) for the most recent financial year of at least IDR 40 billion
- share capitalization prior to the listing date of at least IDR 200 billion
A prospective listed company that is still in a loss position or has not earned any profits or has operated for less than two years must, at the end of the second financial year after its listing, obtain operating profits and net profits based on its financial projections. Specifically for companies whose business takes quite a long time to reach breakeven point, it could obtain operating profits and net profits based on its financial projections at the end of the sixth financial year after its listing.
2. Corporate Governance. By virtue of the New Listing Rule, IDX revokes all provisions related to company-supporting functions set out in the old listing rule, i.e., requirements to have independent commissioners, an independent director, an audit committee, an internal audit unit and a corporate secretary. This is to avoid overlapping rulings among capital market authorities as OJK has issued specific regulations governing similar matters. IDX will follow OJK regulations on corporate governance requirements.
Notwithstanding the above, OJK has yet to issue a specific regulation requiring public companies/issuers to have an independent director. It is also unclear whether there will be one. In the absence of a ruling on this matter, in theory listed companies are no longer required to have an independent director.
3. Documents Submission. IDX now only requires a prospectus to be submitted, instead of the previous lengthy list of required documents, information of which was already covered in the prospectus (e.g., corporate records, description of the use of proceeds, analysis of risk factors and business prospects). Further, submission of some documents (e.g., environmental impact analysis permit and signature specimen of the authorized representatives) is no longer required under the New Listing Rule.
The New Listing Rule requires all documents to be submitted electronically (in soft copy version).
4. No Preliminary Listing Agreement. To conform with OJK rules that no longer require a preliminary listing agreement (perjanjian pendahuluan pencatatan efek (PPPE)) as a registration document for a public offering, the New Listing Rule revokes the existing provisions on mandatory preliminary listing application (permohonan pendahuluan pencatatan efek). Therefore, there is no need to execute a PPPE with IDX prior to listing. However, companies will still need to submit a listing application and its supporting documents to IDX at the same time as it submits a registration statement to OJK.
5. No Mandatory Mini Expose. Under the New Listing Rule, presentation of the company profile and listing plan prior to the book building process (known as mini expose) is optional. However, IDX may require the presentation or mini expose to be done before OJK issues the preeffective statement.
6. Free-float requirements. While listed companies are still required to meet at least 7.5% public free float requirements, the New Listing Rule provides guidelines for when a listed company breaches the free-float requirement as a result of a certain corporate action. A listed company has to submit an action plan to fulfil the free-float requirements at the latest two trading days after the company becomes aware of such a breach. IDX may approve or reject the proposed plan, especially the proposed timeline.
If the breach is due to a mandatory takeover, the New Listing Rule provides for a two-year deadline to comply with the public free-float requirement. This is in line with the mandatory sell-down obligation in the OJK Takeover Rule.
7. Procedures for Listing of Additional Shares. The New Listing Rule also stipulates some changes to the price determination of, and application procedures for, additional securities that will be listed by listed companies. They differ based on the corporate action. For example, listing of additional shares from rights issue process can only be done if: (i) the share price is at least the same as the lowest price of the share trading price on the regular market and cash market, and (ii) the application for listing is made at the latest two trading days after the date of the registration statement is declared effective by OJK. If the additional shares are from non-preemptive right process, the shares can only be listed on the IDX if: (i) the share price is at least 90% of the average closing price in the regular market for 25 trading days prior to the additional shares listing application date and (ii) the application for listing is made at the latest six trading days prior to the date of listing of additional shares.
With the New Listing Rule effective since the end of 2018, IDX would expect more company listings in the upcoming years. Tech companies with certain level of capital (unicorns) could now consider seeking capital market funding and listing their shares on the IDX.